How airlines price their tickets is a source of many myths and urban legends. These include tips about the best day of the week to buy a ticket, last-minute discounts offered by the airlines, and the conspiracy theories suggesting that the carriers use cookies to increase prices for their passengers. None of these is entirely true.

Studies have suggested that prices can be higher or lower on a given day of the week – yet, there is no clear consensus on which day that is. Offered prices can in fact drop at any time before the flight, yet they are much more likely to increase than decrease over the last several weeks before departure. Further, the airlines prefer to wait for the last-minute business traveler who’s likely to pay full fare rather than sell the seat prematurely to a price-conscious traveler. And no, the airlines do not use cookies to manipulate fare quotes – adjusting their inventory for specific customers appears to be beyond their technical capabilities.

What is true about pricing in the airline industry is that carriers use complex, sophisticated pricing systems. The airline’s per passenger cost is the lowest when the flight is full, so carriers have incentive to sell as many seats as possible. This is a race against time for an airline, and, of course, no company wants to discount its product more than it has to. Hence, the airlines face two somewhat contradictory goals: to maximize revenue by flying full planes and to sell as many full-fare seats as possible. This is known in the industry as yield or revenue management.

Airlines and their bucket lists

Here is how yield management works. For each flight or route (if we are talking about multi-segment itineraries), the airline has a set of available price levels – from the most expensive fully refundable fare to the cheapest, deeply discounted nonrefundable price. The industry jargon for these prices is “buckets.” Seats can be interpreted as balls that are allocated among these buckets.

Initial allocation of seats among the price buckets is determined by historical data indicating how well a certain flight sells. For example, fewer deeply discounted seats will be offered on a flight on Thanksgiving week than on the same flight during the third week of February. As the seats on a flight sell, yield managers monitor and adjust the seat allocation. If, for instance, the sales are slower than expected, some of the seats might be moved to lower-priced buckets – this shows up as a price drop. As noted above, such price drops can occur at any time before the flight. However, the general trend of price quotes is upward, starting from about two to three weeks before the flight departure date.

Of course, an average traveler wants to know when he or she should buy the tickets for the next trip. Another important question is where to buy this ticket. Airlines distribute their inventory on their own Web sites and on several computer distribution systems, meaning that prices can sometimes differ depending on where one looks for them. We are not entirely sure what precipitates this phenomenon – likely explanations include differences in contracts between the airlines and the distribution systems/travel agents, implying that different travel agents may not have access to the airline’s entire inventory of available prices.

When to book

The airlines’ yield managers start looking at flight bookings about two months before the departure date. This implies that it generally does not pay to book more than two months in advance: Studies show that initially the airlines leave the cheapest price buckets empty, and yield managers may move some seats into those buckets if a couple of months before the departure date the flight is emptier than expected. From two months to about two to three weeks before the flight date, the fare quotes remain mostly flat, with a slight upward trend. However, and perhaps paradoxically, there is a good chance of a price drop during this period. We tend to monitor prices for several days – sometimes up to a week – hoping for a potentially lower quote. It does not always pay off, but sometimes we do manage to save a considerable amount of money.

Two to three weeks before the flight date, the price quotes start increasing. This is the time when business travelers start booking. While price drops are still possible, a chance of a price increase is much higher if you wait to book within this time period. This is also the time when one can find significant differences between price quotes, depending on where one looks and what contract they have with the airlines.

Thus, if we book a trip earlier than three weeks before the flight date, we tend not to delay the purchase. At the same time, we check quotes from multiple travel agents, or go directly to a site that allows for a quick comparison of prices (such as kayak.com or skyscanner.net). Or check the airline itself.

As for answering the original question we posed, here are some simple tips. First, if you have to travel during a peak period, such as Thanksgiving week, it is generally best not to delay buying that ticket. Otherwise, it might pay to monitor the offered prices for some time before committing. The best strategy for booking within the last couple of weeks before the flight, however, is not to delay the purchase, but to try getting quotes from several agents, which is easy to do in the Internet age.

1. Last minute means better deals - Every once in a while you can get a great deal at the last minute. However, usually the best bets are advance purchases and checking out sales that tend to appear most often on Wednesdays.

2. You can change the name on a ticket - On some low cost airlines you can change the name on a ticket for a fee, but on most airlines, and especially when international travel is involved, there are no name changes allowed. If in question, read the rules before you buy or contact the travel agent/airline you intend to buy your ticket from.

3. You can book tickets more than a year in advance - Reservation systems are really only built to book up to a year in advance. Anything beyond 365 days from now can be requested, but you will wait for it to get confirmed, and for the price.

4. You can upgrade a ticket to first class for a nominal fee - Some charter airlines, and low cost airlines may offer this, but don't ask the Lufthansa agent if you can upgrade your New York to Frankfurt flight to first class for fifty bucks - the price difference will have a few more 00's in the equation.

5. Airlines will accept tickets from another airline if you are traveling between the same airports - It may seem common sense but when airlines start cancelling flights and passengers see their options dwindling, they will often run up to other airlines. To change airlines you need to see if the airline you are booked with has a ticketing agreement with other airlines and if they will endorse your ticket for travel with another airline. A lot less common now that tickets are almost all electronic.

6. You need to stay over a Saturday night for the best airfare - This is less and less the standard for securing a good price for your ticket. International travel does usually still have a minimum stay requirement but domestically Saturday night is rarely a requirement anymore.

7. Airlines will offer discounts or special airfares for bereavement/family emergencies - Many airlines do offer discounts for this type of travel, but most low cost airlines do not. The discounts are offered for travel wholly on one airline. You won't be able to travel on several airlines and secure this type of airfare.

8. You always have the choice of booking a one way ticket, instead of a roundtrip - True enough again domestically, however several countries can and will refuse visitors entry into their respective countries without proof of a roundtrip ticket.

9. Airlines can change a ticket booked by a travel agency - Unfortunately, this is not always true. The travel agency, whether it be online or in person, owns the file and may have ticket rules that airline reservation agents simply have no access to. Or, you may be booked on more than one airline with specific flight routing that got you the airfare you wanted.

10. You can change/refund tickets bought through a wholesale outlet or a bucket shop - Because these tend to be highly discounted tickets, changes or cancellations are rarely permitted. The seats are often bought in bulk from the airlines and the airfares are private and are not accessible to airline reservation agents.

Redemption & commercial booking for SQ on its website is only possible for 350 days in advance.

For redemption booking the round trip is 2x the miles needed for one way. So for flexibility it is sometime beneficial to book two way on one way tickets. Sometime changes is only needed on one way and do not need to upset the other sector.

pirated wrote:Full service airlines these days feeling the heat from the budget airlines and the fares are just a shade higher on certain season.

Advantage of full service airlines is that they offer more frequencies and are more flexible in case a flight date change is needed.

Budget airlines are usually non changeable. Take it or forfeit the tickets.

Once I paid cheaper on qantas than on tiger air for the same route. Full service plus free upgrade !

Agreed totally.

Dun be fooled by budget airfares. I usually take SQ or CX to HKG instead of Jetstar or Tiger (Macau) cos for the same dollar value or top up a bit more, I can enjoy full inflight services + baggage limit :-)